2019 (1) TMI 124 - HC - VAT and Sales Tax

High Court overturns assessment order due to improper notice, violating natural justice.

The High Court set aside the best judgment assessment order and remanded the matter for further proceedings. The Court found that the authorities failed ... Cancellation of petitioner's registration - whether the cancellation was at the petitioner's request or suo motu by the authorities? - Held that:- The Department could not deny that it has in its possession all the details of the petitioner. As the petitioner's counsel could demonstrate, the petitioner must have submitted Form No.I at the time of its seeking registration and that contained all the details. When the authorities had their notice returned with an endorsement that “no such firm”, they could have ensured service of notice by checking the records. For the proceedings they proposed might visit the petitioner with penal consequences - matter remanded for reconsideration - petition allowed by way of remand. Issues:1. Cancellation of VAT/KGST registration.2. Validity of best judgment assessment order.3. Violation of principles of natural justice in assessment proceedings.4. Service of notice at the correct address.5. Failure to inform authorities about business closure.6. Remand of the matter for further proceedings.Analysis:1. The petitioner, a private limited company, had its registration cancelled by the respondent authorities in 2014. Dispute exists whether the cancellation was at the petitioner's request or suo motu by the authorities. The registration was cancelled on 13.10.2014.2. In February 2016, the Commercial Tax Department issued a notice to the petitioner's Cochin branch office for tax arrears. The notice was returned with an endorsement 'no such firm.' Subsequently, the best judgment assessment was completed, leading to the filing of a Writ Petition by the petitioner challenging the Ext.P6 order.3. The petitioner's counsel argued that the assessment order violated the principles of natural justice as the firm had ceased to exist from 2014. The counsel highlighted the failure of the authorities to serve notice on the petitioner's permanent address available in the records, as required by Form No.I under Rule 17(7) of the Kerala Value Added Tax Rules (KVAT Rules).4. The Government Pleader defended the respondent's actions, stating that the notice was sent to the petitioner's last known address at the Cochin branch. It was emphasized that the petitioner had not informed the authorities about business closure or provided an alternative communication address besides the Cochin branch.5. The High Court observed that the Department possessed all details of the petitioner, including those submitted in Form No.I during registration. Despite the notice being returned with an endorsement of 'no such firm,' the authorities should have verified the records for accurate service to avoid penal consequences for the petitioner.6. Consequently, the Ext.P6 proceedings were set aside, and the matter was remanded to the respondent for further action. The Court directed the petitioner's representative to appear before the Commercial Tax Officer (Works Contract), Ernakulam, on a specified date for further proceedings in accordance with the law.